UK PMI: Sharp decline should bolster MPC easing appetite - Lloyds

Today’s flash reading of the Markit PMI report of the United Kingdom showed a sharp decline. Analysts from Lloyds Bank point out that the data provides an insight to the post-referendum landscape.

Key Quotes:

“July’s ‘flash’ PMI survey saw the composite PMI falling to 47.7 from 52.4 in June, the weakest reading since April 2009. Within the breakdown, services sector output posted the more striking fall to an 88-month low of 47.4, while manufacturing – seemingly obtaining some benefit from a weaker currency – eased to a mere 41-month low of 49.1.”

“Today’s one-off ‘flash’ surveys provide an early, if partial, insight to the post-referendum landscape from a reliable and long-running indicator of UK economic activity.”

“While sentiment may yet stabilise over the coming months, the marked deterioration in the headline activity readings is also borne out in the forward-looking business expectations for the service sector, which historically have had a closer mapping with official services sector output measures. These saw the biggest decline on record, to the lowest reading since December 2008.”

“To be sure, the MPC will want to see some corroboration from other activity indicators in deciding the ultimate scale of the stimulus they are considering for the economy, rather than basing monetary policy purely on one set of ‘flash’ PMIs.”